Time To Keep Off Fresh Shorts

Nifty tested the 23.6% retracement level (22981) for the second day and failed to close above this. In any case, a close above 22981 will confirm the short-term reversal.The Derivative Data shows that all the Call premiums were eroded

The equity indices closed mixed as the fresh selling pressure was absent. NSE Nifty ended with just 14.20 points or 0.06 per cent decline. It settled at 22,945.30. Nifty IT and CPSE indices were the top gainers, with 0.95 per cent and 0.90 per cent, respectively. The Oil and Gas is down by 0.51 per cent. The Microcap and Smallcap indices continue to fall, as they decline by 1.99 per cent, and 1.59 per cent, respectively. The Consumer Durable Index is down by 1.36 per cent, and the FMCG declined by 0.88 per cent. Auto, Media, Bank Nifty, PSU Bank, and Pharma indices were down by over half a per cent. The market breadth is negative as 2,128 declines and 720 advances. About 652 stocks hit a new 52-week low, and 296 stocks traded in the lower circuit. Godfrey Phillips, ABB, HDFC Bank, Bharti Airtel and Glaxo were the top trading counters in terms of value.

The Equity benchmark index above is to cope with the selling pressure for the second day. As mentioned earlier, the 22,800 is acting as a rock-solid support. It has been holding the market for the past five days. There is no improvement in the volumes, which indicates fresh selling pressure is almost absorbed. Nifty formed a hammer candle and a higher high, higher low. The price structure looks like a bottom formation for now. Even though the market breadth is extremely negative, in the broader market and benchmark index, the IT stocks are able to protect from the fall. Nifty tested the 23.6 per cent retracement level (22,981) for the second day and failed to close above this. In any case, a close above 22,981 will confirm the short-term reversal. The positive divergence in hourly RSI is still valid. Interestingly, it also failed to close above the 50 zone. The Derivatives data shows that all the Call premiums were eroded. The FII shorts were not reduced, either. In this scenario, any short-covering may lead to a sharp bounce towards 23,139 and 23,240. As long as 22,800 is not broken on a closing basis, it is better to stay away from the fresh shorts. Apply neutral strategies, hedging is the best strategy for now.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)